Table Of ContentAftermath
POSSIBLE FUTURES SERIES
Series Editor: Craig Calhoun
In 2008, the World Public Forum convened a group of researchers and statesmen in Vienna
to take stock of major global challenges. The magnitude of the global financial crisis was
only just becoming clear, but the neoliberalism and market fundamentalism of the post-
Cold War years had already taken a toll of their own.
Austrian Prime Minister Alfred Gusenbauer opened the meeting with a call to make
sure the urgent attention the financial crisis demanded was not just short-term and super-
ficial but included consideration of deeper geopolitical issues and governance challenges
facing the global community.
In this spirit, several of the researchers present envisioned a project to bring together
the analyses of leading scholars from a range of different countries, assessing not only the
financial crisis but shifts in relations among major powers, trends in political economy, and
the possible futures these opened. The group sought insight into emerging issues; it did not
indulge the fantasy that the future could be predicted in detail.
The World Public Forum, created to facilitate a dialogue of civilizations rather than
a clash, saw value in bringing high quality research to bear on public issues and possible
futures. It provided financial support to the project including opportunities for many of the
researchers to gather at its annual meetings on the island of Rhodes. This initial support
was crucial to inaugurating the present important series of books.
VOLUME I
Business as Usual: The Roots of the Global Financial Meltdown
Edited by Craig Calhoun and Georgi Derluguian
VOLUME II
The Deepening Crisis: Governance Challenges after Neoliberalism
Edited by Craig Calhoun and Georgi Derluguian
VOLUME III
Aftermath: A New Global Economic Order?
Edited by Craig Calhoun and Georgi Derluguian
ALSO IN THE POSSIBLE FUTURES SERIES
Russia: The Challenges of Transformation
Edited by Piotr Dutkiewicz and Dmitri Trenin
Aftermath
A New Global Economic Order?
Edited by Craig Calhoun and Georgi Derluguian
A joint publication of the Social Science Research Council
and New York University Press
NEW YORK UNIVERSITY PRESS
New York and London
www.nyupress.org
© 2011 by Social Science Research Council
All rights reserved
Text Design: Debra Yoo
Library of Congress Cataloging-in-Publication Data
Aftermath : a new global economic order? / edited by Craig Calhoun and Georgi Derluguian.
p. cm. -- (Possible futures series ; v. 3)
“A co-publication with the Social Science Research Council.”
Includes bibliographical references and index.
ISBN 978-0-8147-7283-6 (cl : alk. paper) -- ISBN 978-0-8147-7284-3 (pb : alk. paper)
-- ISBN 978-0-8147-7285-0 (e-book : alk. paper) 1. Global Financial Crisis, 2008-2009. 2.
Developing countries--Economic conditions. 3. Economic history--21st century. I. Calhoun,
Craig J., 1952- II. Derluguian, Georgi M.
HB3722.A324 2011
337--dc22 2010052311
New York University Press books are printed on acid-free paper,
and their binding materials are chosen for strength and durability.
Printed in the United States of America
c 10 9 8 7 6 5 4 3 2 1
p 10 9 8 7 6 5 4 3 2 1
References to Internet websites (URLs) were accurate at the time of writing.
Neither the author nor New York University Press is responsible for URLs that
may have expired or changed since the manuscript was prepared.
Contents
Introduction 7
Craig Calhoun and Georgi Derluguian
1 A Savage Sorting of Winners and Losers, and Beyond 21
Saskia Sassen
2 The 2008 World Financial Crisis and the
Future of World Development 39
Ha-Joon Chang
3 Growth after the Crisis 65
Dani Rodrik
4 Structural Causes and Consequences of
the 2008–2009 Financial Crisis 97
Jomo Kwame Sundaram and Felice Noelle Rodriguez
5 Bridging the Gap:
A New World Economic Order for Development? 119
Manuel Montes and Vladimir Popov
6 Chinese Political Economy and the International Economy:
Linking Global, Regional, and Domestic Possibilities 149
R. Bin Wong
7 The Global Financial Crisis and
Africa’s “Immiserizing Wealth” 165
Alexis Habiyaremye and Luc Soete
8 Central and Eastern Europe: Shapes of Transformation,
Crisis, and the Possible Futures 181
Piotr Dutkiewicz and Grzegorz Gorzelak
9 The Post-Soviet Recoil to Periphery 209
Georgi Derluguian
10 The Great Crisis and the Financial Sector:
What We Might Have Learned 235
James K. Galbraith
Notes 243
About the Contributors 271
Index 275
Introduction
Craig Calhoun and Georgi Derluguian
Perhaps the most significant choices to be made in the contemporary cri-
sis involve the future of development—not just in the core countries that
produced the crisis but also in the rest of the world. There is not likely
to be a simple recovery, if that means a return not only to growth but to
pre-crisis political and economic relations. As Saskia Sassen suggests in
the opening chapter, the crisis has sorted winners and losers in a savage
way. It has revealed strength in some national trajectories and policies,
weakness in what had been boom levels of development elsewhere, and
fragility in much of the financial architecture of Europe, America, and the
international system they have led.
Some of the relative winners have been among the world’s previ-
ously less developed countries, particularly among semi-peripheral coun-
tries gaining entry to the world’s economic (and political) elite. China is
the obvious but not the only example. Brazil suffered less in the crisis and
started to bounce back faster than almost any richer country. Several other
Asian and Latin American countries have also gained in relative stand-
ing as the OECD elite stumbled. There is more development in parts of
Africa than there has been since the 1970s (though not without enduring
fragilities and tensions). And Turkey, which long tracked the performance
of eastern European countries, has more recently outperformed most of
its fellow OECD members.
Introduction 7
At the same time, a number of middle-income countries have been
hit hard, including some of those inside the EU, like Greece, Portugal,
Ireland, and Spain. Several of these had enjoyed dramatic recent growth
and were being touted as global models. Now huge blocks of half-built
housing sit empty, and countries that had recently found themselves
receiving migrants have returned to the role of sending labor abroad. The
crisis has hit hard enough in Latvia to make many citizens reconsider
their rush to separate themselves as sharply as they could from Russia
in the 1990s. But if Russia looks a more inviting partner to some of its
neighbors now, it also took a significant hit during the crisis. It benefited
initially from skyrocketing prices for energy resources but went on to
suffer not only from the later fall in these export commodities but from
losses in Russia’s financial portfolio, largely invested in the West.
In Possible Futures volume 3, contributors assess what prospects
the aftermath of the crisis holds for global economic growth, specific
development policies and patterns in different countries, and how much
growth will bring capacities to meet social needs. These are questions
about real-world political economy, but thinking seriously about them
demands changing academic and practical models of how economic
growth works. For decades, a “Washington Consensus” reigned that
emphasized the importance of free trade across national borders, reduc-
tions in state regulation, and conservative macroeconomic policies that
reduced the burden of taxation on business and protected financial mar-
kets. The consensus is now in tatters. Many of the countries most success-
ful in achieving growth and weathering the crisis are precisely those that
flouted it. But only gradually are the ideas of the economics profession
adjusting to the failures of neoliberalism and the limits of neoclassical
models. The long boom that preceded the 2008 crash—perhaps, better
described as a “multibubble” since it was marked by recurrent crises—was
not just an era when financial engineering was ascendant but also one
when economic orthodoxy was strong and centered on the building of
models often expressed in elegant mathematics but with little purchase
on real-world problems of economic development.
This third volume gathers chapters from a strong group of interna-
tionally prominent economists (including some labeled “heterodox”) as
well as other social scientists who seek to revive and advance the agenda
of political economy. This doesn’t mean in all cases arguing for state-led
8 Calhoun and Derluguian
development; it does mean taking states and more generally the relation-
ships between politics and economics seriously.
Even before the crisis, the grip of orthodoxy and the onetime
Washington Consensus had begun to loosen. There were, for example,
more and more critics of the “structural adjustment” programs run by
the World Bank and the International Monetary Fund, which demand
that countries limit government spending and economic intervention in
various ways in order to be eligible for loans (with IMF backing often a
condition not only for access to the funds it controlled but to favorable
terms from the private financial sector). Even as criticism grew, these
programs continued to derive support from orthodox economic opinion
(though macroeconomics became something of a backwater to academic
economics during an era when new microeconomic models dominated).
In fact, macroeconomics is important, and macroeconomic reforms
were important to the success of some developing countries—like
Brazil—and macroeconomic failings were basic to the deep suffering of
some economies, like that of Greece. But conventional approaches built
a great deal of ideology into the demands made on developing countries.
Ostensibly simply a call for macroeconomic prudence, structural adjust-
ment policies were also pressure to rely more on the market and to be
good clients in an era when major financial institutions in the Global
North were lending to the Global South. The reforms demanded were
often draconian and had direct negative impacts on the living conditions
of the citizens of those countries, while long-term benefits remained a
matter of faith. They involved ending food-price subsidies in many cases,
for example, and in others insisting that governments not finance the
provision of anti-retroviral drugs to fight HIV/AIDS. In retrospect it
is odd to contemplate how much “prudence” was urged on governments
in developing countries by the same professionals that threw prudence
out the window when it came to the machinations of hedge funds and
investment banks in London and on Wall Street. But in addition to the
immediate human cost, the theory may have been wrong.
Orthodox policy advice was flouted by some developing countries,
perhaps most prominently and successfully by China. Argentina decided to
ignore IMF demands when it faced an earlier crisis, and there were many
who thought that Greece might have done better if it had followed suit.
More generally, even though flouting IMF and World Bank advice was
Introduction 9
